Batten down the hatches
Well friends, sequestration has come and gone with little market reaction. I think most US stock market followers expected to have some kind of sell off by now, but it didn't happen. So, what is the market psychology now? It is incredibly difficult to guess what the mood of investors may be at any given point, but I tend to believe that the market will find a way to disappoint the most investors most of the time... otherwise we'd all be rich.
Last week I warned of a RumWave prediction that a multi day rally would unfold followed by a continuation of a downtrend. Part one of that two part statement has occurred Now, I think it is time for part two. The rest of this post will support that claim.
Daily scores.. we are quite overbought again on the daily and 4 hour scores:
The DJIA weekly chart shows a little strength, but still lots of indecision. If the rest of my data didn't support a downtrend, I would think there could be a little more upward momentum here. The next candle should solidify the direction, but the RSI is in "ridiculous land":
The SPY is showing some signs of fatigue.. oscillators are favoring downward moves over the next 4-6 weeks:
The Russell 2000 is one of my favorite charts. I believe small caps tend to lead the mega caps. The RUT now has a nice little red candle at the end of the chart, and the oscillators support continued moves lower:
Finally, the ugliest chart... the Nasdaq (QQQ). IF the market does make a down move for the next few weeks the QQQ will have formed a HUGE head and shoulder pattern... very bearish. The fulfillment of that pattern would be very very bad for the tech sector, and probably the rest of the US market:
So, I'm currently sitting on a bearish position. Time will tell if it plays out for me!
GOOD LUCK NEXT WEEK!